Tata Group-backed automobile giant, Tata Motors' share price witnessed a huge buying sentiment on December 24, rising by more than 3%. The latest upside comes after a 6-consecutive sessions losing streak where Tata Motors stock dipped by nearly 9% Also, the latest upside is the best single-day performance in December month. However, year-to-date, the stock remains in a bearish tone. Is Tata Motors stock overvalued or undervalued and should you buy?
Tata Motors Share Price:
After market hours, the stock ended at Rs 736.35 apiece, up by 1.92% on BSE, with a market cap of Rs 2,71,059.63 crore. The stock gained by as much as 3.11% to hit an intraday high of Rs 745 apiece, making it the best single-day performance in December month. The last time Tata Motors shares were above 3% was on December 6th.
The robust gains in Tata Motors on December 24th could be attributed to a major rally in Tata Group stocks after reports stated that the conglomerate is working on an initial public offering (IPO) for its NBFC company, Tata Capital.
Tata Capital IPO will reportedly be in the size of Rs 15,000 crore and would go public in 2025.
Tata Capital IPO could be the largest public offer of Tata Group. The last IPO launched by Tata was in November 2023, Tata Technologies which was worth Rs 3,042.51 crore in size.
Tata Capital Limited ("TCL"), the flagship financial services company of the Tata Group, is a subsidiary of Tata Sons Private Limited and is carrying on business as a non-banking financial company.
Notably, Tata Motors stock is still down by 38% from its 52-week high of Rs 1,179.05 apiece, and trades near its 52-week low of Rs 716.60 apiece.
Is Tata Motors Stock Overvalued Or Undervalued?
As per Alpha Spread data, the Relative Value of one TATAMOTORS stock under the Base Case scenario is 1 610.02 INR. Compared to the current market price of 736.1 INR, Tata Motors Ltd is Undervalued by 54%.
Tata Motors Demerger:
The auto player is set to split in the ratio of 1:2. The company is planning the demerger of Tata Motors into two separate listed companies housing A) the Commercial Vehicles business and its related investments in one entity and B) the Passenger Vehicles businesses including PV, EV, JLR, and its related investments in another entity.
Tata Motors Prices Hike:
Earlier in December, the company announced a price hike of approximately 2% across its trucks and buses portfolio which is part of its commercial vehicle segment. The price increase will come into effect from 1st January 2025.
Recommendations on Tata Motors Stock:
Brokerage LKP Securities is expecting the volume growth in the luxury car market to be sustained in the coming quarters.
It added, "As far as JLR is concerned, their volumes grew by 3% due to strong demand for Range Rover, Range Rover Sport and Defender partly offset by (1) aluminium supply chain disruptions, and (2) temporary hold (in UK and EU regions) on 6.5k vehicles to allow additional quality control checks in Q3 CY24. The company expects the aluminium supply chain issues to normalize in the H2 FY25E with a strong pick up in the production and wholesale volumes. Global macros should add to JLR growth going forward."
Further, on JLR's EV performance, LKP's note said that electrification in the PV segment has witnessed divergent trends across various geographies. While China continues to see a steady uptick in EV penetration (24% in 9MCY24); however, EV penetration in the large SUV segment has not seen any meaningful uptick, with 13% in Q3CY24 versus 11% in Q3CY22. EV penetration in the China market witnessed significant improvement in the passenger car and mid-size SUV segments, where JLR has limited presence with the ramp down of Jaguar brand volumes.
The brokerage is expecting the launch of EV vehicles in the coming years and will embark on this journey, with the launch of an electric Range Rover slated for the release in CY25E.
On a domestic basis, LKP expects the domestic CV segment volumes to increase at a CAGR of 3-5% over FY24-27E, led by (1) 3% CAGR in the M&HCV segment volumes and (2) 4-5% CAGR in the LCV segment volumes. Overall, we expect the demand to recover gradually from FY26E, led by (1) increased government spending on infrastructure, (2) higher fleet utilization levels and fleet operator's profitability and (3) strong demand traction in the buses segment.
Also, the company will continue leverage on CNG and EV growth to drive volume growth in the PV segment, it said.
Thereby, for Tata Motors, LKP believes marketing spends are expected to remain elevated (to drive JLR's order book). Healthy FCF generation is expected to support investments towards electrification at JLR and the company is on track to turn net cash by FY25 (guidance maintained). In the domestic PV segment, TaMo witnessed strong growth during festive season. Recent/new launches are expected to support growth. Domestic CV demand is also expected to pick-up during H2.
Click it and Unblock the Notifications
Sign in with Google